(Updates with comments from Nomura in 10th paragraph.)
Feb. 2 (Bloomberg) -- Latin American currencies will probably stabilize after renewed optimism about the global economy fueled the biggest monthly rally since 2009, according to the top forecaster for the region in Bloomberg Rankings.
“I don’t think these are good levels to start buying Latin American currencies,” Standard Chartered Bank’s Mike Moran said by telephone from New York. “We’re pricing in too rosy a picture of what the macroeconomic environment will look like in six to 12 months. Does that mean I’m in a position to drastically change my short-term outlook? Probably not, but most of the good news is priced in.”
Investors poured into higher-yielding assets such as commodities and emerging currencies in January after a broad sell-off in the fourth quarter saw them reaching two-year lows. This year’s rally has withstood downgrades of European government debt, indications of slowing growth in China and talks on a Greek debt swap that dragged into this month.
Standard Chartered yesterday published its so-called real money portfolio, recommending fund managers bet the Brazilian real weakens against the dollar in the first quarter.
Colombia’s peso gained 7.1 percent against the U.S. dollar last month while Mexico’s peso appreciated 6.8 percent and the Brazilian real climbed 6.9 percent. Foreign investors increased bets on the Chilean peso by $2 billion in the first month of the year, helping drive a 5.7 percent gain. The Bloomberg JPMorgan Latin American Currency Index’s 5.6 percent advance was the steepest monthly gain since May 2009.
Moran still forecasts the Chilean peso to gain to 450 in the second half and the Mexican peso to reach between 11.8 and 11.6. Brazil’s real may reach 1.65 by the end of the fourth quarter, he said. Chile’s currency gained 1.4 percent to 480.15 the highest closing level since Sept. 15, while Mexico’s peso gained 0.5 percent to 12.8259 as of 12:18 a.m. in Mexico City and the real rose 0.8b percent to 1.7210.
Moran was the best forecaster over the past six quarters, according to a study of 23 analysts by Bloomberg Rankings.
For now, the region’s major currencies probably will stabilize around their 200-day moving averages, he said, predicting that any weakening back to the fourth-quarter levels would be an opportunity to buy.
“The fundamental macroeconomic outlook is still pretty positive, but the pace of buying in emerging-market and Latin American currencies in January has taken us off-guard,” Moran said. “There is scope for a disappointment which could cause a pullback, but any weakness would be a new buying opportunity.”
Strategists at Nomura Securities Inc. backed Moran’s view today. Most of the region’s currencies will probably weaken towards the middle of the year before closing 2012 stronger than today, Nomura strategists, led by Tony Volpon in New York, wrote in a note to clients.
U.S. Federal Reserve Chairman Ben S. Bernanke’s policy of keeping the federal funds rate low until late 2014 is likely to undermine the dollar, the Nomura strategists wrote. Sustained growth in China may support commodity prices, key drivers of currencies in Brazil, Chile, Colombia and Mexico, they wrote.
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